Master of Science in Economics

Faculty / School

Faculty of Business Administration (FBA)


Department of Economics

Date of Submission



Dr. Qaiser Munir, Institute of Business Administration, Karachi

Project Type

MSECO Research Project

Access Type

Restricted Access


This study attempts to investigate the Efficiency of two alternative banking systems (Islamic vs Conventional Banks) operating in Pakistan and also compares the results of technical efficiency of the same (Conventional vs. Islamic). The sample of ten Conventional Banks and Five Islamic (All Islamic Banks operating in Pakistan excluding the Islamic Windows of the Conventional Banks) have been taken and analyzed in this study. This paper adopts the Data Envelopment Analysis (DEA) methodology and covers the unstudied latest data, from 2011-2017. The data for the analysis has been extracted from the State Bank’s review of the banking sector and publicly available annual financial statements of the banks. The results were also analyzed for the scale inefficiency of the sample banks using efficiency frontier analysis. Moreover, we tested the efficiency scores obtained through DEA with various accounting variables important for the banking sector and measured correlation between the two. Our results indicate that, on average the Technical Efficiency scores of both Conventional and Islamic banks were 98.5% and 98% indicating the mean input waste of 1.5% and 2% respectively. On the efficient frontier, it was observed there were more scale efficient Islamic Banks than Conventional Banks. Moreover, the Pearson correlation result indicates that the efficiency scores and accounting variables have significant correlation with the accounting variables (used in our analysis).


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